NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Economic Effects of Runs on Early 'Shadow Banks': Trust Companies and the Impact of the Panic of 1907

Carola Frydman, Eric Hilt, Lily Y. Zhou

NBER Working Paper No. 18264
Issued in July 2012
NBER Program(s):   CF   DAE   ME

We use the unique circumstances that led to the Panic of 1907 to analyze its consequences for non-financial corporations. The onset of the panic occurred following a series of scandalous revelations about the investments of prominent financiers, which triggered widespread runs on trust companies associated with those men. Using newly collected data, we find that corporations with close ties to the trust companies that faced severe runs experienced an immediate decline in their stock price, and performed worse in the years following the panic: they earned fewer profits and paid fewer dividends, and faced higher interest rates on their debt. Consistent with the notion that information asymmetries aggravated the consequences of the contraction of credit intermediation, these effects were largest for smaller firms and for industrials, whose collateral was more difficult to value than that of railroads.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Information about Free Papers

You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w18264

Users who downloaded this paper also downloaded these:
Ordonez w19022 Sustainable Shadow Banking
Gennaioli, Shleifer, and Vishny w17115 A Model of Shadow Banking
Odell and Weidenmier w9176 Real Shock, Monetary Aftershock: The San Francisco Earthquake and the Panic of 1907
Gallin Shadow Banking and the Funding of the Nonfinancial Sector
Taylor w18290 The Great Leveraging
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us